Candidates' Last Minute Attempt to Win Over Voters; How the Caucus System Works; Romney's Campaign Strategy; Direct Talks between the U.S. and the Taliban?; Beckham Won't Be Joining French League; Markets Open 2012 With Gains; New Year's Cheer in Short Supply; 2012 Could Make or Break Many Countries; Conflict Between Ultra-Orthodox and Mainstream Jews in Israel; Iowa Republican Caucuses Begin; Mitt Romney Hoping Not to Repeat 2008 in Iowa; Importance of Iowa Caucuses; Important Dates for US Presidential Republican Primaries

Aired January 3, 2012 - 16:00:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

MAX FOSTER, HOST: And they're off -- 10 months before the U.S. presidential election. The first official votes are about to be cast in the state of Iowa. Tonight, how these results may determine who faces off against Barack Obama.

Live from London, I'm Max Foster.

Also tonight, Israel divided -- how a culture clash in a orthodox neighborhood led to this -- young boys dressed up as Holocaust victims.

They're getting down to business. On the first day of trading of the year, the CEO of PIMCO makes his predictions for 2012.

Months of campaigning in a key U.S. state have come down to the final hours. Tonight marks the official kick-off of the 2012 race for the White House.

Republican voters in Iowa are the first in the nation to decide which candidate should eventually take on Barack Obama.

The presidential hopefuls are making a mad dash for the last minute votes, playing up their conservative credentials in the small farm state. Iowa is hugely important in this race, not because it's an accurate predictor of who will eventually win the Republican presidential nomination, but because it sets the tone for the state by state battle.

Iowa can boost -- can boast a sagging campaign -- or boost a sagging campaign for -- or it can bury a struggling contender. So traditionally, it narrows the field, convincing some candidates with poor showings to call it quits.

Tonight's contest is too close to call. Here's how the candidates stacked up in the latest CNN/"Time"/ORC Poll. And former Massachusetts governor, Mitt Romney, is on top, with 25 percent; followed by Congressman Ron Paul, with 22 percent. Romney's 3 point lead is well within the margin of error, meaning those two candidates are statistically tied.

Former Senator Rick Santorum has enjoyed a surprising surge into third place, while former congressman, Newt Gingrich, has taken a hit, falling to fourth.

Now, the closer it gets to the caucuses, the faster the mud flies. And the final weeks of campaigning in Iowa have been marked by increasingly negative ads, one reason for yet another big shift in the polls.

Anderson Cooper looks at the candidates' last minute attempt to win over voters.

(BEGIN VIDEOTAPE)

ANDERSON COOPER, CNN ANCHOR (voice-over): At this stage in the race, there's no room for error.

GOV. TERRY BRANSTAD (R), IOWA: It's a wide open race. People have been watching the debates and they're looking for the perfect candidate.

COOPER: Mitt Romney, leading in the national polls, all but ignoring Iowa, though, until the last few weeks. His late focus might be paying off, keeping expectations low but a win now a very real possibility.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: This president has failed. He went on the -- the "Today" show shortly after being inaugurated. And he said if I can't get this economy turned around in three years, I'll be looking at a one term proposition.

I'm here to collect. We're going to take it back. We're going to take it back.

COOPER: Ron Paul is hoping to hold on to the momentum he's built here. The Texas congressman spent the past 10 days fighting back against questions about controversial newsletters with his name on them. Still, Mr. Paul's supporters are among the most dedicated in Iowa and could be the difference in a victory here.

REP. RON PAUL (R), PRESIDENTIAL CANDIDATE: If liberty is the most important issue, the most important responsibility of government is to protect liberty and not to be the policeman of the world and not to have a runaway welfare state.

RICK SANTORUM (R), PRESIDENTIAL CANDIDATE: I do have a Hawkeye jacket on.

COOPER: But if anyone has the momentum in these final days, it's former Pennsylvania senator, Rick Santorum.

(on camera): Senator Santorum has spent months here in Iowa. He's visited all 99 counties and held more than 350 events. Today his small staff in the campaign headquarters in Des Moines are working the phones. They're trying to capitalize on his sudden surge, trying to ensure that Santorum supporters actually show up to caucuses.

SANTORUM: I'm asking you to not settle for someone who -- who, as your nominee who might be able to win the election, but the election would be a pyrrhic victory. In other words, we wouldn't have a candidate who is going to be elected president who will do what's necessary of what America needs.

COOPER (voice-over): Santorum's surge comes mostly from Evangelicals and has taken away some of the traction Newt Gingrich had been enjoying. The former Georgia congressman leading the stage just a month ago, but relentless attacks from his opponents seemingly having an effect.

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: We've gotten into a really sick system where people raise lots of money to hire very nasty people to run very vicious commercials. And it is sickening, the whole process.

COOPER: It's been a volatile race for months, with various candidates jumping to the lead only to fade weeks later. Michele Bachmann, who won the Ames straw poll just four months ago, tonight seems far back in the pack. The same for one time frontrunner, Governor Rick Perry, hoping for a last minute push in a caucus that can be as unpredictable as this race so far.

Anderson Cooper, Des Moines, Iowa.

(END VIDEO TAPE)

FOSTER: Well, it may seem -- seem strange that for now, at least, the focus of American politics is so far away from Washington.

Jonathan Mann explains why Iowa has such a prominent role in nominating a president and how its imitate caucus system actually works.

(BEGIN VIDEOTAPE)

JONATHAN MANN, CNN CORRESPONDENT: The state of Iowa is a thinly populated place of farms, friendly towns and, for the most part, few opportunities to get America's attention. But once every four years, politicians and the press descend on this quiet corner of the U.S. Midwest to watch for one night, as its people gather in hundreds of meetings across the state to talk politics and then vote for their favorite candidates for president.

PAUL STEINHAUSER, CNN POLITICAL EDITOR: The Iowa caucuses are really like nothing else in American politics. I mean imagine it, a cold winter night, sub-freezing temperatures. It takes a lot for a person to come out, travel to their local school or maybe their local church and take part for about two hours in a caucus. You've really got to be into the process.

UNIDENTIFIED MALE: Is the...

MANN: It's quaint and a little quirky. For example, there may not be a secret ballot or even a paper ballot at all. And winning Iowa doesn't predict much. Mike Huckabee won the Republican caucuses in 2008, but he didn't win the Republican presidential nomination and he's not the president today.

WOLF BLITZER, CNN ANCHOR: Let's listen in to Mike Huckabee right now. He's the winner for the Republicans in Iowa.

MANN: Barack Obama did enjoy a surprise first place finish in Iowa, which helped put him on the map. The rest is history.

And that is Iowa.

The question is why Iowa?

Americans have long chosen their presidential candidates state by state, with the candidates and the contests moving from one state to another. Most states hold what they call primaries -- primary elections to choose delegates to attend national party nominating conventions later in the year.

But instead of a primary, Iowa has its caucuses. And back in the '70s, it rescheduled the caucuses all on one evening. And it scheduled that one evening ahead of all the state primaries. Iowa made its caucuses the first event in America's long and complicated way of picking presidential candidates. It's been important ever since, because it marks the start of the nominating process, even if it doesn't predict how it will finish.

Jonathan Mann, CNN.

(END VIDEOTAPE)

FOSTER: Well, we want to get an update now from the frontrunners' campaign.

Our Candy Crowley is a few minutes away from Mitt Romney's headquarters in Des Moines -- and, Candy, how are they feeling there, confident?

CANDY CROWLEY, HOST, STATE OF THE UNION: They feel pretty good. They feel pretty good.

I had a chance, briefly, to talk to Governor Romney along the rope line, as he was shaking hands with some voters who had come out to hear him talk. He said he's feeling good. He thinks they're going to do well.

But he defines well as in the top three. And I think that's pretty much a given, I mean just seeing the polls that have come out.

What Mitt Romney would really like is to win this thing.

If he can't win this thing, he would like to lose to either Ron Paul, because he doesn't think that Ron Paul has a chance to really become the Republican nominee, or he would like to be second to Rick Santorum, a former Pennsylvania senator, another person the Romney campaign doesn't really think can go the distance, doesn't have the money, doesn't have the support to really be a major threat to Romney.

So he expects to enter an (INAUDIBLE) here. But they -- they feel great. And they feel great enough to run a very cautious campaign at this point. This is -- this is a campaign that hold -- that has sat down recently with -- with reporters for one-on-one interviews.

But those questions that you can shoot at them along the rope line, that they now have people -- aides that kind of shoo away reporters so they don't get too close. They have kind of a little cat walk, so he is up above the crowd and up above reporters.

So they really want to play this very cautiously, because when you're on top -- and that's where Mitt Romney is right now, not just in Iowa, but across the country, folks look at him as the frontrunner. They don't want to wreck that.

So you run a very careful campaign. And that's exactly what Mitt Romney is doing right now -- Max.

FOSTER: And, Candy, can I ask you, in terms of foreign policy, how much is that playing into the campaign right now and who's strongest there, really?

CROWLEY: Well, in terms of resume, you'd have to say Jon Huntsman. He is the former Republican governor of Utah. But President Obama appointed him ambassador to China. He is quite well versed in U.S.-Chinese relations. He has touted, in fact, his foreign policy experience, because he's the only one of the Republican candidates out there that actually has any foreign -- real foreign policy experience to tout.

But, how much does it matter?

First of all, as you know, the U.S. is still kind of struggling in the economy. That is really uppermost in the minds of voters, who's going to be best on the economy.

But even if you look back in history, let's say, when a little known governor from Arkansas named Bill Clinton challenged a sitting president, George H.W. Bush, who was a decorated World War II hero. He had been a head of the CIA. He had been ambassador to the U.N. He, too, had been ambassador to China. He had probably the best foreign policy resume of any candidate and he was -- already had four years experience in the White House. And he lost.

Except in times of war, particularly controversial war, Americans tend to put foreign policy on the back burner and they tend to look at economic policy. And I think that's true in this campaign.

FOSTER: So much more ahead on tonight's crucial vote in Iowa. We'll follow frontrunner Mitt Romney on his final day of campaigning and see whether he can keep up that momentum.

Also, one of CNN's best political analysts will make his predictions for the caucus night and all that coming up a little later on in the show for you.

Make sure you tune into CNN for our election special, as well. We'll have live coverage of the results and analysis from our top political team, including Candy, of course. It starts at midnight here in London, 8:00 a.m. in Hong Kong.

You're watching CONNECT THE WORLD live from London.

Still to come, a spokesman for the Taliban says it is prepared to open an office outside Afghanistan for the very first time to negotiate with foreigners. Coming up, what the militant group wants in return.

Plus, some justice at last for the parents of Stephen Lawrence, the black teenager whose murder 18 years ago became a defining moment in British race relations.

And it's a make or break year for the Eurozone, but do its leaders have what it takes to put it back on the right track?

I'll ask one of the world's biggest bond investors.

(COMMERCIAL BREAK)

FOSTER: You're watching CONNECT THE WORLD on CNN, the world's news leader.

Welcome back to you.

Now, direct talks between the U.S. and the Taliban could be on the table after the Afghanistan-based group said it was prepared to open an office outside the country for discussions with foreigners.

CNN's Nick Paton Walsh explains the significance and the conditions of the proposal.

(BEGIN VIDEOTAPE)

NICK PATON WALSH, CNN CORRESPONDENT: What is symbolic about this announcement, it is the first time in a decade that the Taliban have said they're willing to talk to the Americans without the usual precondition that all U.S. troops must leave Afghanistan before they're prepared to talk.

What's on offer is reasonably slight, though. They're willing to open this office in Qatar and hold talks in the event that Americans release some Taliban prisoners held in Guantanamo Bay.

Now, that release is far from a given. Many U.S. officials concerned about these men again being at large.

Also, people are wondering exactly how this came around, about the process involved, because normally in peace negotiations, secret talks would initiate the process and then you'd have a public announcement like this.

Now, there have been secret talks between the Taliban and the U.S. and Afghan officials over the past years, but they haven't gone particularly well. So many were caught by surprise by this public announcement from the Taliban reversing their years long held policy.

The real question is exactly how will these talks happen technically. One peace negotiator we've spoken to referring to this office in Qatar as being a bit like a football ground, almost neutral treaty, where people will turn up, hold these talks and see what can actually come of them.

But they come at an enormously complicated time in Afghanistan, concerns at how cohesive the insurgency is, whether they all answer to one leader, if that leader is in negotiation with the Americans. The Americans themselves talking regularly about the timetable for their withdrawal, their drawdown in the forthcoming two years and still negotiating with Afghan officials what kind of presence they can have in future.

So today, what really should have been a monumentous announcement, the Taliban are interested, for the first time, in talking to the Americans, became a little confused in this deeply mired political landscape in Afghanistan.

So really unclear quite what today's announcement means.

Nick Paton Walsh, CNN, Beirut.

(END VIDEO TAPE)

FOSTER: Here's a look at some other stories connecting our world tonight.

The Arab League will soon hear firsthand what its monitors have witnessed in Syria. A committee of foreign ministers will meet on Saturday to discuss the team's findings so far. The Arab League chief yesterday suggested the mission is making progress, but also said there's no doubt the killing continues in Syria, citing ongoing sniper attacks.

CNN has been showing you exclusive footage of sniper fire from a journalist who slipped into Homs, the center of the uprising. We're not identifying him for his own safety.

Here's a brief reminder of his report.

(BEGIN VIDEO CLIP)

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The snipers are -- on basically every main street, they have checkpoints on both sides. Snipers would shoot everybody who is basically crossing this street between 4:00 p.m. and 8:00 in the morning. This is an unofficial curfew.

(END VIDEO CLIP)

FOSTER: Prosecutors have started presenting their case in the trial of former Egyptian President Hosni Mubarak. The ailing Mubarak was brought into the courtroom on a stretcher. He's accused of ordering the killing of protesters during last year's uprising. The prosecutor reportedly called Mubarak a tyrant who allowed friends and relatives to destroy the country.

A German national suspected of one of the biggest arson sprees in the history of Los Angeles may have been motivated by his mother's arrest, according to officials. Harry Burkhart was arrested after more than 50 fires were started over the weekend, mostly in parked cars. Burkhart has since been charged with one count of arson. Police haven't ruled out further arrests.

(BEGIN VIDEO CLIP)

JOHN DURAN, WEST HOLLYWOOD MAYOR: There may be more people out there. I know the investigation is ongoing. The -- the person in custody is being interviewed to see what he's got to offer. Search warrants were served on his home earlier today. More evidence is being collected. There may be additional people.

But to cautious that much havoc in such a large swath of the city over the last four days, you're right, it does suggest more than one person being involved.

(END VIDEO CLIP)

FOSTER: Tens of thousands of Hungarians rallied in Budapest on Monday against the country's new constitution. The joint protest was held by opposition groups against the new so-called basic law, which went into effect on New Year's Day. Protesters argue it undermines democracy and cements the power of the ruling party.

But the government says it completes the democratic process started in 1989.

Two men have been found guilty of the racist murder of a black teenager in Britain 18 years ago. Stephen Lawrence was stabbed to death near a bus stoop in London in 1993. But a bungled investigation left his killers on the run, resulting in the Metropolitan Police being branded institutionally racist by a public inquiry. Gary Dobson and David Norris were eventually convicted after new forensic evidence came to light.

Coming up, one of the world's most recognizable sportsmen makes a decision about his future.

And national soul searching in Israel after this young girl is harassed by grown men on her way to school.

(COMMERCIAL BREAK)

FOSTER: You're watching CONNECT THE WORLD live from London.

Welcome back.

I'm Max Foster.

Now, it appears that David Beckham will not be heading to Paris after all, despite persistent reports leaving the former England captain with a move to France, PSG is saying that Beckham won't be joining the French Ligue leaders.

PINTO: And a lot of people connected with the Paris Saint-Germain, with David Beckham. Everyone was saying this is 90 percent done. This is 99 percent done.

Well, you know what?

It's not going to get done at all, because it was Leonardo, the sporting director of PSU, who came out on Wednesday, earlier today, and said David Beckham doesn't want to move to Paris for family reasons. He is electing to stay in Los Angeles.

FOSTER: He likes LA.

PINTO: He likes LA. His family likes LA. He likes the schools where the kids are. He doesn't want to uproot them again to a different continent. Victoria is pretty happy out there, as well.

So this, for now, because I never say that a deal is completely done or completely dead, because you never know in football. But for now, there's no chance he's coming to -- to Paris to play for PSG.

FOSTER: OK, an update on the rumors there. But, also an update on Liverpool's Luis Suarez and his ban.

Is the club pursuing that?

PINTO: No, they're not. They announced shortly before kick-off tonight, because Liverpool is playing Manchester City right now, they announced shortly before kick-off that they would not be appealing the eight match ban handed out to Luis Suarez for racially abusing Patrice Evra in a Premier League game back in October, that they still believe that the player is innocent, that he did not mean to racially insult Patrice Evra.

Luis Suarez continues to say that he meant no harm in what he said, that the words negro or negro in South America is something they use on a daily basis.

However, Liverpool is saying that they won't appeal. Suarez is obviously going with that decision from LSU.

FOSTER: And before you go...

PINTO: Yes?

FOSTER: -- the NBA, basketball...

PINTO: Yes?

FOSTER: -- it's looking -- it's hotting up, isn't it?

PINTO: Yes. It's still very early in the season, but everybody was already talking about how long is the Man Heat going to go undefeated for. Not for long, I guess is the -- is the answer to that question.

They got off to the best start in franchise history, 5-0. But they lost last night to the Atlanta Hawks, which is a little bit of a surprise. And they lost at home.

The thing is, Max, that with this shortened season, normally they play 82 games. They've got 62 -- 66 games in less time, as well. So teams are playing four games in five days, three games in five days. And the legs just really can't keep up with that kind of rhythm.

So it's a lot tougher to go undefeated for longer periods of time, even though Lebron James scored 28 points on Tuesday night for The Heat, they lost 100-92, the Hawks, at 4-1, doing very well.

No more undefeated teams in the NBA, because the Oklahoma City Thunder lost last night to the Dallas Mavericks, as well.

We'll have all the other sport coming up on "WORLD SPORT" in about an hour's time.

FOSTER: In an hour.

Pedro, thank you very much, indeed.

Still to come on CONNECT THE WORLD, from the U.S. elections to a new leader for North Korea -- one of the world's biggest bond investors on the global events that could define 2012.

Also, a sign that shocked and repulsed much of Israel -- a protest invoking the Holocaust is the latest dividing line between the ultra orthodox and Jewish mainstream. and on your marks, get set, vote -- we are just hours away now from the first hurdle in the race for the White House. Analysis from a man who knows U.S. politics inside out, coming up.

(COMMERCIAL BREAK)

MAX FOSTER, HOST: You're watching CONNECT THE WORLD on CNN. Time now for a check of the world headlines.

Just hours to go until Republicans in Iowa gather at 809 caucus sites to vote on their choice for US presidential candidates. It is the first contest in the 2012 presidential race. A half dozen candidates have spent the day campaigning, and polls show a tight race.

Egyptians in the northern Nile delta, the rural south, and the southern Sinai are taking part in the third and final round of parliamentary elections. Egypt's main Islamic parties dominated the first two stages of the elections.

The Taliban may be ready to drop their long-held demand that the US military leave Afghanistan before any negotiations. A Taliban spokesman says the insurgent group is opening an office in Qatar to facilitate talks with foreigners.

British police are investigating after a woman's body was discovered in woods on an estate belonging to Queen Elizabeth II. Police believe the woman's remains could -- the remains at a site at Sandringham, well, they could've been up there -- could have been there for up to four months. A pathologist said it was unlikely she had died from natural causes.

Now, the partying may be over, the predictions may be gloomy, but at least there was a positive start to 2012 as markets across the globe got down to business. Buoyed by some strong manufacturing figures, the Dow gained almost 180 points.

In Germany, unemployment figures for Decembers bucked the trend across the eurozone, hitting a 20-year low, helping the DAX to close up 1.5 percent. In London, it was an even better day for the FTSE. Although, as CNN's Matthew Chance reports, the New Year cheer may be in short supply.

(BEGIN VIDEOTAPE)

(FIREWORKS)

(CROWD CHEERING)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): If fireworks were a measure of a country's prospects, 2012 might be Britain's year. The spectacular New Year's display over the River Thames was meant to set the tone to usher in the year that London hosts the Olympics and Queen Elizabeth celebrates her Diamond Jubilee.

But even the prime minister acknowledges 2012 won't be all parties and sparkles.

DAVID CAMERON, PRIME MINISTER OF BRITAIN: Of course, I know there will be many people watching this who are worried about what else the year might bring. There are fears about jobs and paying the bills. The search for work has become difficult, particularly for young people. And rising prices have hit household budgets. I get that.

(CROWD CHEERS)

CHANCE: Plagued by financial crisis, spiraling debt, and the threat of renewed recession, many Europeans aren't sorry to see the back of 2011. Celebrations in Paris were euphoric.

But President Nicolas Sarkozy's New Year message was less than optimistic. Trailing in opinion polls ahead of an election battle this year, he did his best to encourage his compatriots.

NICOLAS SARKOZY, PRESIDENT OF FRANCE (through translator): With what is happening in the world, 2012 will be a year of risks and dangers, but also possibilities full of hope if we know how to meet the challenges. Full of dangers if we stand still.

CHANCE (on camera): The problem is, analysts increasingly believe 2012 may be a year of recession in Europe. One leading British think tank, the Center for Economic and Business Research, goes even further at predicting that 2012 may be the year when the eurozone finally starts to break up. One country, it says, possibly two may leave the currency union before year's end.

CHANCE (voice-over): It's enough to take the shine off the extravagant New Year's celebrations in Berlin. German chancellor Angela Merkel has vowed at least to try to keep the euro together.

ANGELA MERKEL, CHANCELOR OF GERMANY (through translator): Today, you can trust me to do everything in my power to strengthen the euro. This will only be possible if Europe learns from the mistakes of the past.

One of them is that a single currency can only be successful if we in Europe work more closely together than we have done so far.

CHANCE: Some argue progress has already been made, that Europe may already be setting a course to recovery. But even though New Year may be a time for positive resolutions --

(FIREWORKS)

CHANCE: -- the start of 2012 seems overshadowed by feelings of doom and gloom.

Matthew Chance, CNN, London.

(END VIDEOTAPE)

FOSTER: Well, my next guest believes 2012 could make or break many countries. Mohamed El-Erian is the CEO of PIMCO, one of the world's biggest bond investors. Earlier, he told me that four factors will determine whether this year will be memorable for all the wrong reasons. The first is the crisis in the eurozone.

(BEGIN VIDEOTAPE)

MOHAMED EL-ERIAN, CEO, PIMCO: Europe, as it stands today, and the eurozone in particular, cannot deliver on economic growth and debt containment. Something has got to change. There has to be an active decision to improve things. If there isn't an active decision, the risk of fragmentation is going to increase over time.

FOSTER: Your problem with active decisions is that there are elections coming up, for example, in France, so you don't know how the opposition, for example, is going to play things and whether or not they're going to end up in power. So, is that the problem, here, the uncertainty politically?

EL-ERIAN: There are a few challenges. One is political change. We have seen a number of governments change in Europe, and we will continue to see this this year.

Secondly, no one wants to make the difficult decision. And the difficult decision today is basically to acknowledge that, to use President Sarkozy's words, you have to re-found the European Union, the eurozone. You have to do it differently. And no one wants to be the father of that decision because that decision has collateral damage.

So, instead, people are stuck in what I call active inertia. They're active, lots of summits, lots of discussions. But it's inertia. They're not actually doing anything that different. And we're going to have to see either decisions taken actively by policy-makers, or they'll be taken passively by developments on the street.

FOSTER: Europe, obviously, dominating discussions in the markets at the beginning of the year, but I know that you've highlighted three other key areas that you're concerned about, and obviously the US always plays into this as the world's largest economy, and I presume you're basically talking there about the elections. Elections create uncertainty, so you don't know what's going to happen there.

EL-ERIAN: Correct. We -- we're entering the election cycle. We need in this country some decisions to be made between trade-offs, between immediate stimulus and medium-term fiscal reform, between tax changes and expenditure changes, between current generations and future generations.

There's lots of important decisions that have to be made, and we're entering a period where most likely, nothing's going to happen for the next 11 to 12 months, which is another way of saying that unfortunately, the largest economy in the world will continue to face sluggish growth and persistently high unemployment. And that's not good for the US, and it's not good for the global economy.

FOSTER: And things there unpredictable, but not nearly as unpredictable as they are in countries like Syria, Iran. I know you're concerned about countries like that, and North Korea. Potentially flashpoints, of course, they consistently are. But is -- are you more concerned about that this year than you were last year?

EL-ERIAN: Yes, and for two reasons. The first is that things seem to be coming to a boil. And the second is this wonderful distinction that Tom Friedman wrote about in the "New York Times."

When countries get destabilized, they can either implode or explode. When they implode, the problems remain within the country. When they explode, the country -- you get contagion. You get contamination of other countries.

When you look at Iran, when you look at Syria, when you look at North Korea, there's always a risk that a destabilized country can explode regionally as opposed to implode. So, this is something that everybody has to keep on the radar screen and assess the extent to which things are getting worse or better.

FOSTER: So, three areas you're concerned about, Europe, the US, and these potentially destabilizing countries. But I know you're also interested in a fourth area, which is more global, right? It's about a global movement of citizens, uprisings almost.

EL-ERIAN: Absolutely. Popular movements, Max, have become very important. There's a recognition out there that the system is not fair. That the system tends to benefit a small elite and not the masses.

There's also been an amazing increase in income inequality and wealth inequality. Combine that with social media, the ability of Twitter and Facebook to facilitate coordination among different popular movements, and what you have is a global phenomenon.

The key issue in 2012 is whether this movement will be able to pivot. Pivot from complaining about the past to influencing the future. And you see this question in the Arab world, you see this question in other countries, you even see it in the United States with the Occupy movement.

So, these movements have to be taken seriously. There's a legitimate reason why they are happening around the world, and the question is whether they'll be able to navigate this very tricky pivot from the past to influencing the future.

(END VIDEOTAPE)

FOSTER: Mohamed El-Erian on what's shaping up to be a very interesting year. From the French elections to the uprising in Syria, we'll bring you all the developments here on CONNECT THE WORLD, of course.

Well, still to come, religious tensions rise in Israel as protesters compare themselves to victims of the Holocaust. We'll bring you the reaction right after the break.

(COMMERCIAL BREAK)

FOSTER: The same religion, different interpretations. This disparity is at the heart of an escalating struggle between ultra-Orthodox Jews and mainstream society in Israel. As Kevin Flower reports, the tensions took a startling turn at the weekend, with protesters from both sides provoking outrage.

(BEGIN VIDEOTAPE)

KEVIN FLOWER, CNN JERUSALEM BUREAU CHIEF (voice-over): For Israelis, it was a shocking and repulsive image. Young ultra-Orthodox Jews donning yellow stars and striped prison uniforms reminiscent of the Holocaust.

The provocative public display drew heavy criticism from all corners of the country, but for the event organizers, their message to stop incitement against the ultra-Orthodox community, had been successfully delivered.

The weekend protest was the latest development in an increasingly acrimonious conflict pitting members of the ultra-Orthodox community known as the Haredim, against the Jewish Israeli mainstream.

(BEGIN VIDEO CLIP)

(CHILD CRYING)

UNIDENTIFIED FEMALE: Well, just walk a little bit, OK?

(CHILD CRYING)

UNIDENTIFIED FEMALE: No?

UNIDENTIFIED CHILD: No.

UNIDENTIFIED FEMALE: Do you want to walk just a little bit?

UNIDENTIFIED CHILD: No.

UNIDENTIFIED FEMALE: No? And then we'll cross?

UNIDENTIFIED CHILD: No.

(CHILD CRYING)

UNIDENTIFIED FEMALE: No?

(END VIDEO CLIP)

FLOWER: The nationally televised story of an eight-year-old girl too terrified to walk to school for fear of being spit on and cursed at by ultra-Orthodox neighbors enraged the country and capped off a series of high-profile attempts by some ultra-Orthodox males to enforce their strict form of gender segregation and rules of modesty on females outside of their community.

SHIRA BEN SASSON FURSTENBERG, NEW ISRAEL FUND: We see streets being separated on holidays, a separate street for men, a separate street for women. We see the buses. We see supermarkets. Women singing is not accepted.

FLOWER: Religious and government leaders have been quick to condemn the practices, and last week, several thousand Israelis rallied against gender segregation, chanting they did not want their country being turned into Iran or being led by a Taliban minority.

(CROWD CHANTING)

FLOWER: Ultra-Orthodox leaders warn that their communities should not be judged based on the actions of a radical few. They say the situation has been overblown.

"The Haredit community accepts the will of the secular community to live their lives in their neighborhoods as they wish," says one ultra- Orthodox spokesman. "I do not want to impose myself on the secular public."

But the Israeli mainstream's divide with the ultra-Orthodox community goes much deeper than issues of gender segregation. The Haredim make up 10 percent of the country, yet they are the fastest-growing segment of the population and constitute a powerful voting block in Israel's coalition government.

There, they have been able to maintain government subsidies for working-age men to study Torah full-time. This, coupled with easily-won exemptions for compulsory military service is, for many Israelis, a source of growing resentment, says author and columnist Bradley Burston.

BRADLEY BURSTON, "HAARETZ" NEWSPAPER: What people are thinking is that this is absolutely unsustainable, that this -- that they can't go on providing these kinds of subsidies for this kind of lifestyle, especially if it seems that the same people that you're subsidizing are going to turn on you, and they're going to turn on Jews everywhere because they don't like their behavior.

FLOWER (on camera): While the tensions that define relations between ultra-Orthodox and other Israelis are not likely to lead to a permanent schism anytime soon, there is a growing realization in the country that faith alone is not enough to keep it unified.

Kevin Flower, CNN, Jerusalem.

(END VIDEOTAPE)

FOSTER: You're watching CONNECT THE WORLD. When we come back, Judgment Day in the state of Iowa. In the next few hours, Republican voters will have their say on who should take on the president -- take on President Barack Obama in this year's race for the White House. Why Mitt Romney is hoping history doesn't repeat itself. That's coming up, right here on CNN.

(COMMERCIAL BREAK)

FOSTER: Well, after six months of campaigning, 13 presidential debates, and millions of dollars spent on the airwaves and on ads, Republican voters in the US state of Iowa will finally start choosing the candidate for the US presidency in just over three hours from now.

According to the latest CNN/Time-Warner -- sorry, CNN/Time/ORC poll, former Massachusetts governor Mitt Romney is on top with 25 percent, followed by Congressman Ron Paul with 20 percent.

Iowa has around two million registered voters, but actual turnout for the caucuses is hard to predict. Mitt Romney has seen his fortunes fall there before in 2008, and this time around, he doesn't want to repeat. Joe Johns reports.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT (voice-over): On the final day of campaigning, energy is everything in Iowa. You watch for loud applause, size of crowds, signs of enthusiasm.

The Romney campaign projects confidence here, but they're careful not to predict the win. In fact, officially they say they never planned to win Iowa, which will be the excuse if they don't.

ANN ROMNEY, MITT ROMNEY'S WIFE: I sense a feeling, a coalescing, a momentum, or whatever it is you want to call it, around Mitt, and I think people are starting to figure out that this is the guy that is going to beat Barack Obama.

JOHNS: In Davenport, the cautious candidate didn't stray from his cautious way. Other candidates were taking questions, mixing it up. Romney was playing it safe. Speaking of his wife, he might as well have been talking about himself lately.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: And she was marvelous. They asked her tough questions, and she did exactly what you're supposed to do. She didn't answer them.

(LAUGHTER)

JOHNS: What the head-on camera, the one facing the candidate, did not show at this moment was empty space in the room.

ROMNEY: This county did good things for me last time around. I need you to get out and do that again with even more votes. Get out and vote and vote and vote.

JOHNS: Usually, advance people get paid to make sure guys like Romney give speeches in smaller rooms where it's easier to pack in the people, making it look more well-attended.

Maybe that's all this was. A mix-up. Though there was a day four years ago in Iowa with Mitt Romney heading into the caucuses facing a surging social conservative Mike Huckabee. Huckabee would win and Romney would not recover.

This campaign would rather not see history repeating itself with the current surging conservative, Rick Santorum.

When the Romney road show got to Dubuque this day, it was a much larger crowd and smaller space. Different energy. And more of the stump speech, playing it safe.

ROMNEY: I believe in an opportunity nation, a merit society.

JOHNS: Romney actually made a reference to the campaign four years ago, but said nothing about the loss. It was another joke about his wife, Ann.

ROMNEY: I'm standing here, she's standing there, and suddenly, her half of the stage collapsed in Dubuque at the Best Western Hotel. And she went down to the ground, landed on her backside, and I said, "How are you, honey?"

A little later, she said, "Well, I fell on 'da butt' in Dubuque."

(LAUGHTER)

JOHNS: One thing is for certain. A winner in this crowded field will be crowned Tuesday night no matter what, but if the polls hold up, the real story out of Iowa may be just that neither Mitt Romney nor any other candidate, for that matter, will have achieved more than 30 percent of the vote here.

In other words, 70 percent will have voted against the winner for only the second time ever in the Republican caucuses, most-likely leaving no one Republican candidate the clear national front-runner.

Joe Johns, CNN, Marion, Iowa.

(END VIDEOTAPE)

FOSTER: And whoever wins in Iowa will get attention and interest and crucial momentum going into next week's election in New Hampshire. Joining me now is CNN contributor John Avlon.

John, first of all, let's talk about turnout, because away from the candidates, we're going to get a sense of the appetite for the election today, aren't we? Just by seeing how many people turn out to vote.

JOHN AVLON, CNN CONTRIBUTOR: That's exactly right. And the Iowa caucus is a high-intensity, low-turnout election. There are around 2.1 million registered voters in the state of Iowa, but only around 120,000 historically turn out for the Republican caucus.

So, it's a fairly self-selecting group, much more conservative and socially conservative even than the rest of the state, let alone the nation, of the Republican electorate.

So, it's a crucial start to the election, it'll establish media momentum. The winner of the caucus tonight will come out with a huge surge of money and attention. But in terms of actual delegates, it's actually not the most representative election. It's just one of the fascinating peculiarities of our process. It's direct democracy at its best or worst, depending on your perspective.

FOSTER: And people talking up Mitt Romney, but actually, this is the test, right? The first test?

AVLON: It is. It is, and it's a crucial test that he invested heavily in last time around, in 2008, when he was running as the social conservative in the field. He was nonetheless flanked to his right by Mike Huckabee. Outspent Mike Huckabee seven to one and still lost. Came in second with 25 percent of the vote to Mike Huckabee's 30 percent of the vote.

Here's the thing. Mick -- Mitt Romney is the only guy in American politics with a glass ceiling. He can't seem to get above 25 percent in the Republican primary polls. So, the rest of the field, who are all to his right, are all splitting that remaining 75 percent.

What will be interesting to see tonight and in the weeks ahead, because January is a crucial gauntlet month in this Republican nomination process, is if any other candidate can rise up and start to consolidate that other 75 percent.

But Mitt Romney's got a real edge, not just in the polls, but in money and organization, and that can make all the difference down this crucial month.

FOSTER: Yet, in terms of policy, what is he doing differently this time that can get him above that 25?

AVLON: Not much. I mean, this campaign has not been about policy. We've had an enormous amount of debates, and those have, of course, touched on policy. What's interesting is that last time around, he was really trying to run as the social conservative candidate.

This time, because of President Obama passing health care reform that the individual mandate was base on, in some accounts, what Mitt Romney did in Massachusetts, he's been forced to own that. So he instead more of the center-right candidate in this field as opposed to on the far right as he was last time.

But this has been -- even with the economy being a number one issue, Rick Santorum is one of the few candidates really talking about the middle class squeeze that's afflicted so many folks, frustrating so many people about the economy.

Mitt Romney's background is in high finance. He created Bain Capital. That could be an asset in drawing a philosophical contrast with the president, but it can make it difficult to connect with voters in Iowa and across the midwest.

FOSTER: And just explain why I keep reading that Ron Paul has no chance of winning this candidacy, and yet is number two.

AVLON: Well, do not count Ron Paul out, especially in Iowa. He is the wild card, here. Ron Paul is a Libertarian congressman from Texas. He ran for president last time around, but he really has been running to promote ideas, his ideas of libertarianism, constitutionally limited government.

And in some cases, his views about non-interventionist foreign policy and deep suspicion about the Federal Reserve seem to have been vindicated in some folks' minds over the past four years. He has a very devoted, intense base of support.

I've attended Ron Paul rallies in Iowa, and they extend beyond the college students who rally around him because of his pro-drug legalization positions. These are folks who really have rallied around his message. It is an isolated group, but they are intense. They are going to turn out tonight, and that's why they should not be counted out. Ron Paul is a real wild card in this race.

FOSTER: And you mentioned money. Santorum, I'm reading, the campaign since the polls -- they've been surging in the polls, of course -- 300 to 400 percent increase in fundraising on a daily basis over the past ten days.

So, I guess if you look at that as a graph, he's going to win this by -- what's going to slow -- what's going to slow him down, is what I'm asking.

AVLON: Well, first of all, the point about attention versus money. He said the other day he's raised more money in the last two days than in the last two months. And that says an enormous amount about the power of attention. Once you start surging in the polls, it becomes self- reinforcing.

With all this focused attention on one state, he doubled his poll numbers, he quadrupled his fundraising. If he's able to exceed expectations, if he's able to carry the big "mo," momentum, across the finish line in the caucus, he will come out -- whoever win the Iowa caucus will come out with an enormous amount of media attention and another money benefit from donations.

But it really becomes a clear question about whether or not he's surging at the right time. This has been the most volatile Republican primary in recorded American history. There have been seven people in the front-runner place, according to polls, over the course of this primary this year.

Rick Santorum is the last one to surge as that conservative alternative to Mitt Romney, and he's done it at just the right time, late, before he's been attacked by an avalanche of negative, ads, which is what the Romney campaign and its associated PACs did to Newt Gingrich, cutting his totals in half in just the last month.

FOSTER: John Avlon, we'll be speaking to you a lot over the next few months.

AVLON: Looking forward to it.

FOSTER: Thank you very much, indeed, for joining us.

AVLON: Thank you.

FOSTER: Looking ahead, keep these dates in mind. After Iowa, the state of New Hampshire holds its primary election on January the 10th, just one week away. Mitt Romney has a big lead there. And then, mark in your diaries March the 6th, that's Super Tuesday, with 10 states holding primaries and caucuses.

And of course, make sure you tune in to CNN for our election special. We'll have live coverage of the results and analysis from our top political team. That starts midnight here in London, just a couple of hours from now, 8:00 AM in Hong Kong.

I'm Max Foster, that is CONNECT THE WORLD. Thank you so much for watching. The world headlines and "BackStory" are up next after this short break.